Spain has been held up to other euro zone countries as an example of the benefits of structural reform. That’s fair enough, up to a point. The conservative government’s bank rescues and labour reform have stabilised the financial system and improved competitiveness. The economy is expected to grow 1.2 percent this year and 1.7 percent next year by the European Commission.
Matteo Renzi’s Plan A is to push through domestic reforms, hope the European Central Bank manages to get inflation ticking up, and keep his fingers crossed the Italian economy stops shrinking. But if this fails, a mega wealth tax, debt restructuring and/or exit from the euro beckons.